Introduction

This page summarizes the results of a survey of small rental property owners conducted by Nat Decker of the Terner Center for Housing Innovation at UC Berkeley. Firstly, I want to thank everyone who participated in the survey. As I mentioned in the initial postcard, the owners of small rental properties are not well understood by either academics or policymakers and your answers to these survey questions will help show the real picture of small rental property ownership. I also want to provide additional thanks to everyone who agreed to participate in a follow-up interview. I truly appreciate your generosity with your time.

The survey was solicited by mail and conducted online from March to August 2019. The table below shows the response rate for the survey. A total of 53,000 owners were solicited for the survey. Solicitations consisted of an initial invitation to the online survey via postcard and two rounds of follow-up reminders, also via postcard. The survey consisted of approximately 150 questions covering a broad range topics including the characteristics of the rental properties, tenants, and owners and detailed questions about the decision-making processes for managing and investing in rental propeties. Collectively 1,949 solicitations were found to be undeliverable. 155 owners logged into the survey but were found to not be part of the sample population (e.g. the respondent had recently sold their rental property or the property was never a rental). Of the 50,896 remaining solicited owners, 1,109 began the survey with 836 clicking through the entire survey and the remaining 273 ending the survey prematurely. Not all respondents who clicked through the entire survey answered all applicable questions. The final response rate, including partial responses, was 1.8%. Collectively, respondents owned 17,037 units.

The Survey Response Rate Was Low
Results Number Percent
Total Sample 53,000 100
Bad Addresses 1,949 3.7
-
Survey Starts 1,109 2.1
Out of Population 155 0.3
Partial Responses 259 0.5
Click Throughs 695 1.3
-
Click Throughs + Partial 954 1.8

In addition to the survey I conducted 161 interviews to develop a more detailed understanding of small rental property owners. Interviews were solicited at the conclusion of the online survey and conducted via phone in the weeks after the respondent completed the survey. Interviews generally lasted from thirty minutes to an hour and covered basic information such as the owner’s portfolio size, the markets they operated in, and their properties and tenants, and more detailed discussions of their acquisition, financing, rent-setting, maintenance, and tenant selection strategies, and their tenant screening procedures.

The summary below provides a chart or table of how survey-takers answered each question on the survey. Not every survey question is summarized, as a few questions are not very interesting in isolation (e.g. the number of bedrooms of the unit surveyed) or had very few responses. Note that the total number of responses varies from question to question because of incomplete surveys. Some of the questions are cross-tabulated with the portfolio size of the owner. The distribution of survey takers by portfolio size is shown below:

Most Respondents had more than 2, but less than 50 units
Portfolio Size of Owner n
1-2 units 185
3-10 units 606
11-50 units 240
>50 units 78

What kinds properties were surveyed?

The survey was limited to the owners of small rental properties. Condominiums were included, as each condominium unit is its own property. Cooperative units were included as well, though only 2 respondants were asked about a cooperative unit. Most of the survey respondants owned a single-family detached house. While the sample was drawn from properties that were identified as having less than 5 units, a few surveyed properties were larger.

Who Were the Surveyed Owners?

The owners who responded to the survey were quite diverse, reflecting some of the diversity of owners nationwide. Most owners held their properties under their own name, but larger owners were more likely to hold their properties in a corporate entity (mostly LLCs). Individual owners were mostly over 60 years old, male, and white, though younger, female, and non-white owners were not uncommon.

While no institutional investors responded to the survey (the largest portfolio was 465 units) there were substanial differences in the extent to which rental properties were a major part of the owner’s professional life. Small portfolios, for the most part, meant that owners spent relatively little of their work-week managing their properties, whereas portfolios of 50 units or more typically required half or all of individual’s working hours. Large-scale owners also were more likely to be real estate professionals, while smaller-scale owners often were retired, or had full- or part-time employment in field that were unrelated to real estate. Larger-scale owners tended to also be wealthier and higher-income than small portfolio owners.

Acquiring & Holding Rental Properties

The differences between large- and smaller-portfolio owners was also apparent in the acquisition of properties. Smaller-scale owners were more likely to have converted the property from owner-occupied to rental, in part because many of these owners previously lived in the house or had acquired the home through inheritance. smaller-scale owners were also more likely to regret, or or be unsure of their decision to acquire the property. While most owners acquired their property at least in part for the rental cash flow, intentions for the income varied. Many small- and mid-sized portfolio owners saw their rental properties as part of their retirement plan and a substantial number of these owners had already retired. Most owners used traditional methods to find and purchase their properties, using brokers, visiting the property and making standard purchases (as opposed to, for example, buying the property at a foreclosure auction or using a 1031 exchange). Most respondents followed a buy-and-hold strategy.

What are their tenants like?

Larger-scale owners were more likely to hold properties at the lower end of the market, with lower purchase prices, lower rents, and lower-income tenants. There didn’t appear to be substantial differences in the range of time tenants lived in their units.

Rents & Rent Regulation

While there was a slight variation in rents by the portfolio size of the owner most of the variation in rents comes from the differences between geographic markets (e.g. San Francisco generally has higher rents than Elyria, OH) and the units themselves (e.g. 3-BR homes with a yard tend to have higher rents 2-BR units in a duplex with no yard). Owners mostly based rents on their preception of demand for their unit and used online sources like Zillow and Craigslist to understand current demand levels.

To adjust for differences between markets I calculated comprable rents for every unit using the Zillow Rent Index (ZRI). This Index is meant to estimate the rent for units that are comprable to the survey units in terms of geography (by ZIP code), building type (single-family rental v. apartments), size (measured in square feet), and time (by month of the survey response). The comprable estimates have a few weaknesses (e.g. lot size isn’t considered, physical quality and floorplans aren’t considerd), but ZRI comps do provide a useful baseline of the market.

Profitiblity & Market

Management

Maintenace and Capital Improvements

Tenant Screening and Marketing

Turnover

Section 8

Tenant Problems

Local Policies

86% of owners who reported having an inspection passed the inspection.

Financing